The End of Big Malls Means Big Problems

What's it like to watch a shopping mall die? How do you know when it's happening? First, you'll probably notice vacancies in the once-filled rows of stores that line the mall. Perhaps some of those will be temporarily occupied with cheap businesses selling things like knock-off handbags and lottery tickets. Each time you visit, you'll see more and more parking spaces empty and a general air of neglect around the place. When the "anchor stores" —the Macy's, JC Penney's, and Nordstroms— leave, that's how you'll really know your mall is doomed. Fast forward a few years: the rest of the stores have disappeared and the mall sits abandoned, becoming a hang-out spot for drug dealers and other vagrants.

This is the picture painted by a recent article in Business Insider, but it's a story we've read (and seen) dozens of times. The precarious nature of the mall model is revealed in this illustration of the domino effect that sends malls into a downward spiral. Because of their size and the amount of infrastructure they rely on—everything from the electric lines to the heating to the roofing on out to the landscaping, massive parking lots, and special turn lanes and off-ramps—all of it, super-sized and expensive, malls are a risky endeavor.

When a few stores leave, suddenly the other stores have to pick up the slack. And when a large department store bows out, the mall not only loses that large source of revenue, it also loses a substantial customer draw. Replacing that department store—much like trying to refill a big box building—is a herculean task. Hayley Peterson at Business Insider writes:

When anchor stores close, it can be hard to find businesses to replace them, because they occupy the multistory buildings at mall entrances that are often at least 100,000 square feet. If no replacement tenant is found, the loss could trigger a decadeslong downward spiral for the shopping mall and surrounding communities... When anchor stores are boarded up, traffic to the retailers in the middle sections of malls tends to decrease. That has been happening at shopping malls nationwide, and now many retailers are going out of business and closing their stores as a result.

Now only the small stores are propping up the mall. This unsustainable revenue system combines with the natural declining public interest in a fairly empty building (one that isn't just unappealing because of its sparse businesses but also because it may be perceived as dangerous, given its empty spaces that invite criminal activity). Before long, many malls are forced to shutter their doors.

Unfortunately, the trouble doesn't end there because malls leave behind massive buildings, parking lots and adjacent infrastructure that is now wasted space, not to mention that residents employed at the mall lose their jobs. From the Business Insider article:

"The communities wither away, and they never come back," said Howard Davidowitz, chairman of Davidowitz & Associates, a national retail consulting and investment banking firm.

The best solution is not to build a mall in the first place. But if your town already has one, it's wise to ensure that you're not relying on it for considerable sales tax revenue and jobs. Chances are, it won't be around for long.